Net Investment Income Tax: Who Pays and How It Works

A raise, a property sale, or a strong year for your investments can change more than your savings balance. If your income crosses a set threshold, you may need to consider the net investment income tax. This additional 3.8% federal tax can apply to certain income, including taxable interest, dividends, rental income, and investment gains. It is separate from regular income tax, and it generally applies to the smaller of your net investment income or the amount your modified adjusted gross income exceeds the threshold. Learn how to check whether it could affect you and what records to gather.

Key Takeaways

• Check both the income threshold and your investment income: NIIT generally applies at 3.8% to the smaller of your net investment income or the amount your MAGI exceeds the threshold for your filing status.
• Classify income carefully: Interest, dividends, taxable gains, rents, and some passive business income may count as net investment income. Wages and many retirement distributions generally do not, but they can affect MAGI.
• Review major financial decisions before filing: Keep records of investment and rental income, related expenses, and property sales. An accountant can help estimate NIIT and complete Form 8960.

What Is the Net Investment Income Tax?

The Net Investment Income Tax (NIIT) is a 3.8% federal tax that may apply to certain investment income when your modified adjusted gross income, or MAGI, exceeds the threshold for your filing status. It is separate from regular federal income tax, so investment income may be subject to both.

The NIIT calculation compares two amounts: your net investment income and the amount by which your MAGI exceeds the applicable threshold. The tax generally applies to the smaller amount. That means crossing the threshold does not make all your income subject to the NIIT. The Financial Planning Association’s explanation of the calculation offers more detail.

Net investment income can include taxable interest, dividends, rents, royalties, capital gains, and income from certain passive business activities. Wages and self-employment income generally aren’t included in net investment income, but they can increase your MAGI and affect whether the tax applies. Understanding how the NIIT treats these two figures can help you assess whether it may affect your tax return.

How the 3.8% tax differs from regular income tax

Regular federal income tax is based on your taxable income, filing status, and tax brackets. The NIIT is an additional 3.8% tax that may apply to investment income when your MAGI exceeds the threshold for your filing status. It doesn’t replace regular income tax, and it isn’t charged on your entire income.

For example, if your MAGI is above the threshold but your net investment income is relatively low, the NIIT generally applies only to that smaller investment-income amount. If your investment income is higher than the amount by which your MAGI exceeds the threshold, the excess MAGI amount generally limits the income subject to the tax. The Urban Institute’s overview of the NIIT explains how this surtax works.

How modified adjusted gross income (MAGI) affects NIIT

MAGI determines whether you meet the income threshold for the NIIT and helps set the amount subject to the tax. For NIIT purposes, MAGI generally starts with your adjusted gross income (AGI), with specific adjustments under tax law. For many taxpayers, it will be the same as AGI, but certain exclusions, such as the foreign earned income exclusion, can require an adjustment.

If your MAGI is at or below the threshold for your filing status, you generally won’t owe NIIT. If it is above the threshold, compare the excess with your net investment income. The tax is generally 3.8% of whichever amount is smaller. The IRS’s guidance on NIIT and MAGI explains the relevant calculation. If you have income exclusions or other adjustments, check how they affect your return.

How MAGI differs from taxable income

MAGI and taxable income are related, but they aren’t interchangeable. AGI is calculated from your income after certain adjustments. Taxable income is generally what remains after subtracting deductions, such as the standard deduction or itemized deductions, from AGI. NIIT MAGI starts with AGI and applies specific adjustments; it is not simply taxable income with deductions added back.

This distinction matters because the NIIT threshold test uses MAGI, not taxable income. Deductions may lower your taxable income without lowering your MAGI for NIIT purposes. When estimating whether the tax could apply, review your AGI and any NIIT-specific adjustments rather than relying only on your taxable income. The IRS provides further detail in its NIIT questions and answers.

Who May Owe NIIT?

Income thresholds by filing status

For tax year 2026, you may owe the Net Investment Income Tax (NIIT) if your modified adjusted gross income (MAGI) exceeds the threshold for your filing status and you have net investment income. The thresholds are $200,000 for single filers and heads of household, $250,000 for married couples filing jointly, and $125,000 for married people filing separately.

Crossing a threshold does not make all your income subject to the 3.8% tax. NIIT generally applies to the smaller of your net investment income or the amount your MAGI exceeds the threshold. For example, if your MAGI is $10,000 above the threshold, at most $10,000 of net investment income may be subject to NIIT. The IRS overview of NIIT explains how the calculation works.

Why the thresholds stay fixed

NIIT’s individual income thresholds have remained unchanged since the tax began in 2013, and they are not adjusted for inflation. That means income growth over time may bring you closer to the threshold, even if your purchasing power has not grown at the same rate.

Review your expected MAGI each year, especially if you anticipate a large investment gain, rental income, or a change in household income. Planning ahead can help you understand whether a financial decision may affect your tax bill. The 2026 NIIT guide from Wealth Enhancement Group also covers the thresholds and their lack of inflation adjustments.

How NIIT applies to estates and trusts

Estates and trusts may owe NIIT, but they use a different income threshold from individuals. In general, the tax may apply when an estate’s or trust’s adjusted gross income exceeds the level at which the highest federal income tax bracket for that entity begins. This threshold is typically much lower than the thresholds for individual filers, so an estate or trust may owe NIIT on undistributed investment income sooner.

The result can depend on the type of entity, the income it earns, and how much income it distributes to beneficiaries. Trustees and executors should review the entity’s income and distribution plans before filing. The Financial Planning Association’s article on NIIT and non-grantor trusts explains why trust-level tax planning matters.

How special rules apply to nonresident aliens

Nonresident aliens are generally not subject to NIIT. However, special rules may apply if a nonresident alien makes an election to be treated as a U.S. resident for tax purposes, such as an election available to certain spouses. In those cases, NIIT may apply under the rules for resident taxpayers.

If you are a nonresident alien with U.S. investments, rental property, or other U.S. income, confirm how your status and any elections affect your tax return. The rules can depend on your circumstances, so don’t assume that U.S.-source investment income automatically means you owe NIIT. The IRS guidance on NIIT explains how the tax applies to nonresident aliens.

What Income Counts as Net Investment Income?

Net investment income (NII) generally includes income from investments and certain passive business activities. It can include taxable interest, dividends, rents, royalties, some annuity income, passive business income, and taxable gains from selling investments or other property. You may subtract certain expenses and deductions that are properly connected to that income when calculating NII.

The rules depend on the income’s source and, in some cases, your role in the activity. For example, rental income may be treated differently depending on whether the activity is passive or whether you materially participate. The IRS instructions for Form 8960 explain the categories of income and adjustments used to calculate the tax.

It’s also important to distinguish NII from modified adjusted gross income (MAGI). Some income, such as a taxable distribution from a traditional retirement account, may increase MAGI without being included in NII. That income could affect whether you exceed the NIIT threshold, while the tax itself applies only to the portion determined under the NIIT calculation. Keeping these two figures separate can make the rules easier to understand.

Taxable interest, dividends, annuities, royalties, rents, and passive business income

Taxable interest from sources such as bank accounts and many bonds generally counts as NII. Dividends from stocks and funds may count as well. NII can also include royalties, rental income, and the taxable portion of certain annuity payments.

Some business income may count when the business activity is passive for tax purposes. This can apply if you own part of a business but do not materially participate in its operations. The classification depends on tax rules and the specific facts, not simply on whether you receive business income.

When you review these amounts, consider related expenses and deductions that may be allowed in calculating NII. Keep records of income and costs, especially for rental or royalty property and business interests. The IRS guidance on NIIT outlines the types of income that may be included.

Capital gains from investments, real estate, and other property

Taxable gains from selling stocks, bonds, mutual funds, and other investment assets generally count as NII. Both short-term and long-term gains may be included. Gains from selling real estate or other property held for investment may also count, depending on the circumstances.

A sale of your primary residence may receive different treatment. If you qualify to exclude some or all of the gain from regular taxable income, the excluded amount generally is not included in NII. Any taxable gain may still be subject to NIIT, depending on your income and the details of the sale.

Selling rental property can involve additional tax considerations, including depreciation and how you used the property. Keep purchase, improvement, expense, and sale records so the gain can be calculated accurately. The IRS NIIT questions and answers explain how taxable gains and exclusions may affect the calculation.

How material participation and activity classification affect rental and business income

The tax classification of a business or rental activity can determine whether its income is included in NII. In general, income from a passive activity may count, while income from a trade or business in which you materially participate is generally excluded. Specific exceptions can apply, so the classification should be checked rather than assumed.

Rental activities are often considered passive, even when an owner handles some tasks. Certain real estate professionals may be able to treat rental activity as nonpassive if they meet the applicable requirements and materially participate. Business owners should also look at their actual duties and involvement, not only their ownership percentage or title.

Keep records of the time you spend on an activity, the work you perform, and the expenses you incur. These details may help support the tax treatment reported on your return. The Form 8960 instructions provide guidance on passive activities and related adjustments.

Income generally excluded: wages, self-employment income, Social Security benefits, and tax-exempt interest

Wages, salaries, and self-employment income generally are not NII. Social Security benefits and tax-exempt interest are also generally excluded from the NII calculation. However, excluded income may still matter elsewhere on your tax return.

For example, the taxable portion of Social Security benefits is generally included in adjusted gross income, even though the benefits are not NII. Wages and self-employment income can also contribute to your overall income and affect whether your MAGI is above the NIIT threshold. Tax-exempt interest, by contrast, is generally excluded from both NII and the MAGI calculation used for NIIT.

The distinction is important: an amount can affect whether you meet the income threshold without being subject to the 3.8% tax itself. Check how each item is reported on your federal return, and consult the IRS NIIT guidance if you are unsure how a specific payment is treated.

How retirement distributions affect MAGI but not net investment income

Taxable distributions from traditional IRAs and qualified retirement plans generally are not included in NII. They may, however, be included in adjusted gross income and increase your MAGI. If your MAGI exceeds the applicable threshold, a distribution could affect the NIIT calculation on other income, such as dividends, rental income, or capital gains.

This means a retirement distribution can affect one part of the calculation without becoming NII itself. The NIIT is based on the smaller of your NII or the amount by which your MAGI exceeds the applicable threshold. A change in MAGI may therefore affect the tax owed on investment income.

Tax treatment depends on the account and type of distribution. Review how the payment is reported and whether it is taxable before estimating its effect. The IRS questions and answers on NIIT explain how retirement distributions are treated.

How active-business income and other exclusions or special rules apply

Income from an active trade or business in which you materially participate is generally excluded from NII. Income from a business activity in which you do not materially participate may be treated as passive and included. Gains from selling an interest in a partnership or S corporation can require additional review because the business’s activities and your participation may affect the result.

Estates and trusts are also subject to NIIT rules. Their investment income may be subject to the tax when it is retained, and the income threshold for an estate or trust can be much lower than the threshold for an individual. The way income is distributed or accumulated may affect the tax treatment.

Other exclusions and special rules may apply based on the taxpayer and the type of income. Check the Form 8960 instructions when preparing a return, and consult an accountant if you have an active business, rental property, or trust income to report.

How Do You Calculate and Report NIIT?

Subtract eligible expenses and deductions from net investment income

Start by adding up your gross investment income, such as taxable interest, dividends, rents, royalties, and taxable gains. Then subtract deductions that are properly allocable to that income and allowed under the tax rules. Depending on your situation, these may include certain investment interest, taxes, or expenses tied to rental property. Personal expenses and deductions that are not connected to investment income generally do not reduce net investment income.

Keep records showing what each expense relates to, including receipts, statements, and property records. The IRS explains how to determine net investment income in its questions and answers about NIIT. If you own rental property or have several types of investment income, organizing expenses by activity can make the calculation clearer.

Compare net investment income with MAGI above the applicable threshold

Next, compare your net investment income with the amount by which your modified adjusted gross income (MAGI) exceeds the threshold for your filing status. For example, a single filer with MAGI of $220,000 is $20,000 over the $200,000 threshold.

The amount subject to NIIT is the smaller of your net investment income or your MAGI above the threshold. If your net investment income is $15,000, use $15,000 for the next step. If it is $30,000, use $20,000. The thresholds are not adjusted for inflation, so review them during your annual tax planning. The IRS NIIT guidance explains the threshold test and calculation.

Apply the 3.8% tax to the smaller amount

Multiply the smaller amount by 3.8% to estimate your NIIT. Using the example above, a single filer with MAGI of $220,000 and net investment income of $15,000 would apply the tax to $15,000. The estimated NIIT would be $570.

NIIT is separate from regular income tax. Earning more than the threshold does not mean all your income is taxed at 3.8%, or that all your investment income is necessarily subject to NIIT. The tax applies to the smaller amount from the comparison. Your final calculation may depend on the type of income, eligible deductions, and other rules. Check the Form 8960 instructions to confirm how those rules apply to your situation.

Calculate NIIT on Form 8960

Use IRS Form 8960 to calculate NIIT. The form helps you report investment income, account for eligible deductions, and determine the amount subject to the tax. It also addresses adjustments and special rules that may affect your calculation.

Before filling it out, gather investment statements, Forms 1099, records of rental income and expenses, and details of any investment or property sales. Income from a rental property or business may receive different treatment depending on how the activity is classified and whether you materially participate. Review Form 8960 and its instructions, especially if you own rental property, sold investments, or receive income through a business.

Report NIIT on Schedule 2 of Form 1040 or the applicable fiduciary return

For individuals, NIIT calculated on Form 8960 generally carries to Schedule 2 of Form 1040, which reports additional taxes. Check that the amount transfers correctly from Form 8960 to your return. The IRS Form 1040 instructions explain how supporting forms and schedules fit together.

Estates and trusts may also owe NIIT. They generally report the tax on the applicable fiduciary return, rather than an individual Form 1040. Reporting requirements can depend on the type of entity and the income involved. If you prepare a fiduciary return, review the current instructions for Form 8960 and Form 1041, or ask a tax professional to help confirm the reporting.

Review withholding, estimated payments, and records

Wage withholding may not cover NIIT, particularly if you receive substantial investment or rental income. Estimate your total tax for the year and review whether your withholding and quarterly estimated payments are sufficient. You may be able to adjust paycheck withholding by submitting an updated Form W-4 to your employer. People with self-employment or investment income may need to make estimated payments.

Keep your calculation and supporting documents with your tax records. These may include Forms 1099, brokerage statements, records of property income and expenses, and receipts for eligible deductions. The IRS provides information about estimated taxes and underpayment penalties. Revisit your estimates after a major investment sale, a change in rental income, or another event that could affect MAGI.

What Are Common NIIT Misunderstandings?

The Net Investment Income Tax (NIIT) is a 3.8% tax that may apply when your modified adjusted gross income (MAGI) is above the threshold for your filing status. But being over the threshold does not automatically mean the tax applies to all your income. The calculation also depends on how much of your income qualifies as net investment income.

These two figures serve different purposes. MAGI helps determine whether you’re over the threshold and by how much. Net investment income identifies the income that may be subject to NIIT. The tax generally applies to the smaller of your net investment income or the amount your MAGI exceeds the threshold. The IRS overview of NIIT explains the basic calculation and who may owe the tax.

Other details can affect the result, including whether rental or business income counts as investment income, how retirement distributions are treated, and whether income belongs to a trust or estate. Knowing the common misunderstandings can help you review your tax return more carefully and recognize when it may be useful to ask an accountant for guidance.

Earning above the threshold doesn’t subject all your income to NIIT

Crossing the NIIT threshold doesn’t mean the tax applies to every dollar you earn, or even to every dollar above the threshold. The 3.8% tax generally applies to the smaller of your net investment income or the amount your MAGI exceeds the threshold for your filing status.

For example, if your MAGI is $10,000 above the threshold and you have $4,000 in net investment income, the tax generally applies to $4,000. If your net investment income is $15,000, the amount subject to NIIT is generally limited to the $10,000 MAGI excess. The IRS explains this calculation, but deductions and other details can affect your figures. Check both amounts before estimating what you may owe.

MAGI and net investment income play separate roles in the calculation

MAGI and net investment income are two separate parts of the NIIT calculation. MAGI determines whether you exceed the applicable threshold and measures the amount above it. Net investment income identifies the income that may be subject to the tax, such as taxable interest, dividends, capital gains, rents, royalties, and certain passive business income.

MAGI generally starts with adjusted gross income, with specific adjustments for NIIT purposes. It isn’t the same as taxable income, which reflects deductions. You need to calculate both figures to find the amount potentially subject to NIIT. The IRS instructions for Form 8960 explain how to report net investment income and determine MAGI for this tax. Keeping the figures separate can make it easier to understand how a change in income affects your tax.

Rental and business income may count based on the activity

Rental and business income doesn’t automatically receive the same NIIT treatment in every case. Rental income is often included in net investment income, but the result can depend on whether the activity is passive and how it relates to a trade or business. Business income from a passive activity may count, while income from a business in which you materially participate is generally treated differently.

The rules depend on the facts, including your involvement and how the activity is classified for tax purposes. Real estate professionals may qualify for different treatment if they meet specific requirements, including material participation rules. Keep clear records of your time, expenses, and business activities. The Form 8960 instructions describe how rental and business income may be treated, but an accountant can help assess how the rules apply to your circumstances.

Tax-deferred account distributions can affect MAGI without counting as net investment income

Taxable distributions from traditional IRAs and many qualified retirement plans generally aren’t included in net investment income. However, they usually increase adjusted gross income and may therefore increase your MAGI. A distribution could push you above the NIIT threshold, or increase the amount by which your MAGI exceeds it, even though the distribution itself generally isn’t subject to NIIT.

This distinction can matter if you’re planning a large withdrawal and also have investment income, such as dividends, interest, rental income, or capital gains. Treatment depends on the account and the type of distribution, so check how a planned withdrawal could affect your overall tax picture. The IRS NIIT guidance explains which types of income are generally excluded from net investment income.

Estates and trusts may reach the NIIT threshold at lower income levels

NIIT can apply to estates and certain trusts, and their threshold differs from the thresholds used for individuals. For an estate or trust, the threshold is generally tied to the amount of undistributed net income at which the highest tax bracket begins. Because estates and trusts can reach that bracket at a comparatively low income level, they may owe NIIT even when an individual with similar income would not.

The result depends on the trust or estate’s income, expenses, and distributions, as well as the applicable tax rules. Grantor trusts are generally treated differently because their income is reported by the grantor. Trustees should review whether income is retained or distributed and how that affects reporting for the trust and beneficiaries. The IRS instructions for Form 8960 include guidance for estates and trusts.

How Can You Reduce NIIT Exposure?

Reducing Net Investment Income Tax (NIIT) exposure starts with understanding how the tax is calculated. NIIT is 3.8% of the smaller of your net investment income or the amount your modified adjusted gross income (MAGI) exceeds the threshold for your filing status. A planning step may affect one figure, both figures, or neither, depending on your income and circumstances.

Some options require advance planning, such as choosing when to sell an investment or donate appreciated property. Others begin with good recordkeeping, especially if you earn income from investments or rental properties. Tax rules can limit the deductions, losses, or exclusions available, so don’t assume a strategy will produce the same result for every taxpayer.

Review your expected income and major financial decisions before the end of the tax year. A large investment gain, a home or rental-property sale, or a change in business income may affect your tax picture. The IRS NIIT guidance explains how the tax applies to different types of income. An accountant can help you assess your options and make sure a potential tax benefit fits your broader financial plans.

Time investment sales and income around MAGI thresholds

If your MAGI may approach or exceed the NIIT threshold, consider whether you have flexibility around the timing of investment income. Selling an asset can create a capital gain in that tax year. If your investment plan allows, waiting to sell may shift the gain to a later year when your income could be different.

Timing a sale won’t eliminate a gain, and delaying a sale may not make sense for your financial goals. Consider other expected income, such as a business sale, bonus, or rental-property transaction, before making a decision. NIIT applies to the smaller of net investment income or MAGI above the applicable threshold, as Wealth Enhancement Group explains. Ask your accountant to estimate the tax impact before you act.

Consider eligible pre-tax retirement-plan and HSA contributions

Eligible contributions to a traditional 401(k), 403(b), or deductible traditional IRA may reduce adjusted gross income and, in turn, MAGI for NIIT purposes. Contributions to a health savings account (HSA) may also reduce income if you meet the eligibility requirements and follow the annual contribution limits.

Not every contribution lowers MAGI. Roth contributions, for example, are generally made with after-tax dollars. Retirement distributions may later increase MAGI, even though qualifying distributions are generally not net investment income. Before changing your contributions, check your plan rules, eligibility, deadlines, and expected income. The IRS NIIT Q&A explains how MAGI and investment income factor into the calculation. An accountant can help you assess whether a contribution may affect your tax exposure.

Use tax-loss harvesting and tax-efficient investment placement

Tax-loss harvesting involves selling an investment at a loss to offset capital gains. When tax rules allow, realized losses may reduce the gains included in net investment income, which could lower NIIT exposure. Before selling, consider whether the investment still fits your financial plan and whether you want to replace it. Wash-sale rules may prevent you from claiming a loss if you buy the same or a substantially identical investment within a specified period.

You can also review which investments you hold in taxable accounts and which you hold in tax-advantaged accounts. Account placement may affect when income is taxed, but retirement account distributions can affect MAGI. Losses and deductions have limits, and investment decisions can have consequences beyond NIIT. Wealth Enhancement Group’s NIIT planning guide covers tax-loss harvesting and other planning considerations.

Consider municipal bonds and their tax treatment

Interest from many municipal bonds is exempt from federal income tax and generally isn’t included in net investment income for NIIT purposes. If you’re comparing investments that generate interest, municipal bonds may be worth discussing with a tax or financial professional. Their tax treatment is only one factor, though. Consider the bond’s credit quality, maturity, price, and how well it fits your financial goals.

Rules can vary by bond and by state, and municipal bond interest may affect other tax calculations. Compare potential after-tax returns rather than choosing an investment based only on its tax status. Santora CPA Group’s overview of tax-free bonds offers additional context. Before investing, ask your accountant how a particular bond may affect your federal and state taxes.

Donate appreciated assets or consider eligible qualified charitable distributions

Donating an appreciated investment directly to an eligible charity may help you avoid recognizing the capital gain you could incur by selling it first. If you itemize deductions and meet the applicable requirements, you may also qualify for a charitable deduction. Holding periods, deduction limits, and documentation requirements apply, so confirm the details before transferring an asset.

Some taxpayers age 70½ or older may be eligible to make a qualified charitable distribution (QCD) directly from an IRA to a qualifying charity. A QCD may count toward a required minimum distribution and is generally excluded from income when the rules are met. The transfer must go directly to an eligible organization, and other requirements apply. Review your options with your accountant before making a gift. Wealth Enhancement Group discusses charitable giving as an NIIT planning strategy.

Track allowable investment and rental-property expenses

Certain expenses and deductions may reduce net investment income when they meet tax requirements. Keep organized records for costs tied to taxable investment income and rental properties. For a rental, save receipts and statements for items such as repairs, insurance, property taxes, and other operating costs. Clear records make it easier to calculate income and determine which expenses may be deductible.

Not every cost qualifies for NIIT purposes, and some deductions are subject to limits or allocation rules. Rental income may also receive different tax treatment depending on your participation in the activity and other details. Don’t assume that every expense associated with an investment or property reduces net investment income. The IRS NIIT guidance outlines relevant income and deduction rules. An accountant can review your records and help identify expenses that may qualify.

Review home-sale exclusions and gains from rental-property sales

If you sell your main home, you may be able to exclude some or all of the gain if you meet the ownership and use tests and other requirements. Gain excluded from gross income for regular income tax purposes is generally not subject to NIIT. If part of your gain is taxable, that amount may still affect your net investment income and tax bill.

Rental-property sales follow different rules. The gain may be taxable, and depreciation claimed during ownership can affect your calculation. Your adjusted basis, improvements, selling costs, and use of the property all matter. Keep purchase records, receipts for improvements, and depreciation schedules. The IRS explains how excluded home-sale gains are treated for NIIT. Before selling a home or rental property, ask an accountant to estimate the potential tax impact.

Discuss trust distributions and tax-planning options with an accountant

Trusts and estates may owe NIIT, and their income thresholds can be much lower than those for individuals. The tax result depends on factors such as investment income, deductions, distributions, and whether income stays in the trust or passes to beneficiaries. If you’re a trustee or beneficiary, review expected income and planned distributions before the end of the tax year.

Distributing income to beneficiaries may affect how it is taxed, but a distribution doesn’t automatically eliminate tax or reduce the family’s overall tax bill. Trust documents, fiduciary rules, and each beneficiary’s income all matter. An accountant can help compare the likely tax effects for the trust and its beneficiaries. For more background on NIIT rules for trusts and estates, see Wealth Enhancement Group’s planning overview.

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Frequently Asked Questions

Does NIIT apply to my wages or self-employment income?
Wages and self-employment income generally aren’t subject to NIIT directly. They can still raise your modified adjusted gross income (MAGI), which may affect whether the tax applies to your investment income.

Can an IRA withdrawal cause me to owe NIIT?
A taxable withdrawal from a traditional IRA generally isn’t net investment income itself, but it may increase your MAGI. If you also have investment income, the higher MAGI could affect your NIIT calculation.

Is rental income always subject to NIIT?
Not always. Rental income is often treated as investment income, but the result can depend on how the activity is classified and whether you materially participate. Keep clear records of your rental income, expenses, and involvement in managing the property.

Will I owe NIIT when I sell my home?
If you qualify to exclude some or all of the gain from selling your main home, the excluded amount generally isn’t included in net investment income. Any taxable gain may be subject to NIIT, depending on your MAGI and other income.

How do I report NIIT on my tax return?
Individuals generally calculate the tax on Form 8960 and report it on Schedule 2 of Form 1040. Estates and trusts use the applicable fiduciary return.